MINIMUM WAGE VS WORKFARE + PROGRESSIVE WAGE

• The following article was an opinion piece by the President of the SMF, Mr Douglas Foo. The Chinese version of this article was published in ZaoBao:
• https://www.zaobao.com.sg/zopinions/views/story20201127-1104275

In recent times, latching on DPM Heng Swee Keat’s Ministerial Statement in Parliament, the debate on a minimum wage model and a progressive wage model (“PWM”) has spilled out of Parliament into the general public, with many proffering their opinion. 

Having had the opportunity to be involved in the tripartite movement in Singapore over the years through my involvement in the trade associations and chambers, as well as being fortunate to be on the board of directors of social enterprises, I have seen firsthand the good that Singapore’s labour tripartite partnership has brought about in promoting a stable business environment, and in so doing, uplifting workers (especially the more vulnerable ones). As a former Nominated Member of Parliament, I have constantly advocated both in Parliament and outside, for our people to know more about the hard work of the tripartite partnership, lest its efforts and good results be taken for granted. It is in this context that I would like to humbly share my candid thoughts on the debate.

How about a single minimum wage? – In theory, having a single minimum wage possibly prevents workers from being unduly exploited. Over the years, proponents of a minimum wage in Singapore have from time to time canvassed for a single minimum wage for all Singaporeans working full-time. If this minimum wage were to be set at S$1,300 monthly take-home, this equates to an even higher gross monthly wage of $1,900 after including employee’s and employer’s CPF contributions.  

The overriding objective of a single minimum wage is the increase of wages through an act of law. However, there are many other factors to consider whether to implement a single minimum wage. For instance, who will pay for the increase in wages and the increase in operational costs in Singapore if businesses maintain the same number of employees at the same level of skillsets? Another concern is that with the increase in wages without a corresponding increase in productivity, businesses might not be able to afford to hire some staff and may have to let them go in order to keep the cost of operations down, or be forced to increase the costs of their goods and services. This is of particular concern to businesses during this challenging economic climate.

One can also easily imagine that Singapore will come under intense international pressure to subsequently extend the minimum wage to our migrant workers. Afterall, the minimum wage in most advanced countries are applied to all workers regardless of nationality. While appreciating the contributions of our migrant workers, we should keep in mind that their salaries in Singapore are already considerably higher than what they would earn back home. Should the single minimum wage be extended to them, the increase in costs would be even more significant. Businesses and eventually Singaporeans will have to bear the increase in costs. 

What is the alternative? – Workfare + Progressive Wage Model (PWM) – Instead of making businesses and consumers bear the cost of uplifting wages for all lower-wage workers, the government has fully funded the Workfare Income Supplement (WIS) scheme. Complementing Workfare, the PWM in specific sectors helps to increase wages of workers through upgrading skills and improving productivity. It is implemented via government levers in the cleaning, security and landscape sectors.

While the PWM can be thought of minimum wage plus, businesses find it much more acceptable. First, it is sectoral and not one-size-fits-all. Second, the wage ladders are set through tripartite consultation, taking into account economic realities. Third, wages are tied to the efforts of both businesses and workers to upgrade. Customers also enjoy better service standards and quality. By extension, with a better skilled and trained workforce, our businesses become more productive and competitive. From employers’ standpoint, this makes PWM more sustainable than a single minimum wage.

I am confident that many of the businesses here in Singapore do not be-grudge an increase in employee wages, if such an increase is earned on the back of the employee’s own efforts to seek skill enhancements, leading to increased productivity and efficiency. Wage increment in this manner is not only in keeping with Singapore’s spirit of meritocracy, but also better reflects market realities than a universal minimum wage scheme. 

That the PWM is a product of the tripartite partnership is comforting in the knowledge that this is not a scheme conceptualised out of thin air or without careful thought. The tripartite partnership has worked together to come up with the PWM, and continue to work together to review the PWM.  

How about expanding PWM to more sectors? I believe we can and we should. 

In fact, the government had already signalled its intent to do so. In March this year at the Committee of Supply in Parliament, Senior Minister of State Zaqy Mohamad said that “we… intend to expand the PWM to more sectors”. In June, Senior Minister Tharman Shanmugaratnam stated in his National Broadcast that, “in time, we want every sector to have Progressive Wages, with this clear ladder of skills, better jobs, and better wages for those with lower pay”. And earlier this month, Minister Josephine Teo said that “we want to expand PWM to cover more workers while protecting their employability” and has since convened a new Tripartite Workgroup to do so. 

One of the important factors underpinning Singapore’s post-independence success is that of a strong labour tripartite partnership giving representation to employers, employees and the government in dealing with employment issues. 

Without Singapore’s brand of tripartite partnership, it would not be a stretch to imagine a country riddled with strikes, constant employment disruptions and perhaps even riots from unhappy citizens arising from unstable employment policies. Each individual stakeholder would possibly deem it fit to do all it can to selfishly put forth their interests as priority. 

Recently, the Indonesia Omnibus law protests is yet again a firm reminder of how important it is for a tripartite partnership to work as one, in complement with one another so that all parties are able to benefit in one way or another. In this context, collaboration must be the fundamental tenet of any negotiation. 

To quote the late unionist Brother Cyrille Tan who elucidated the important basis of the tripartite partnership in Singapore in Parliament in 1998, “The tripartite framework has served Singapore well and the objective of trade unions is to safeguard the interests of workers. They can however, do so effectively only if companies become more productive and competitive. The government must continue to provide good infrastructure, transparent regulations and stable conditions to attract investors. Workers can then continue to have good jobs and look forward to fair wage increases and that is the basis of the tripartite relationship.

So where does this leave us? As the President of the Singapore Manufacturing Federation (SMF), with its 88 years of history and in representing our 4000 members, I am happy to state that the SMF supports the work of the recently announced Tripartite Workgroup, looking into the welfare of lower-wage workers.

In conclusion, together with the holistic good that its constructive discourse and practice has brought, the efforts of the tripartite partnership and all its individual stakeholders acting united in one purpose, should be applauded and long may it continue. SG United, together we progress.

Douglas Foo, President, Singapore Manufacturing Federation